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Published by: zerohedge on Apr 27, 2010
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12/18/2012

The Issuer has agreed and, by its acceptance of a Note, each Holder of a Note will be deemed to
have agreed, to treat its Notes as debt of the Issuer for United States federal income tax purposes
(although this shall not prevent a U.S. Holder from making a QEF election, as defined below, on a
protective basis or from making protective filings under Section 6038, 6038B or 6046 of the Code). Upon
the issuance of the Notes, Orrick, Herrington & Sutcliffe LLP will deliver an opinion generally to the effect
that, assuming compliance with the Indenture (and certain other documents) and based on certain factual
representations made by the Issuer, the Class S Notes, Class A Notes, Class B Notes and Class C Notes
will, and the Class D Notes should, be characterized as debt for United States federal income tax
purposes. Prospective investors should be aware that opinions of counsel are not binding on the IRS, and
there can be no assurance that the IRS will not seek to characterize any Class of Notes as other than
indebtedness. Except as provided under "—Alternative Characterization of the Notes" below, the balance
of this discussion assumes that the Notes will be characterized as debt of the Issuer for United States
federal income tax purposes.

Each U.S. Holder will include interest on the Notes in income in accordance with its regular
method of accounting for United States federal income tax purposes unless the Notes are viewed as
having being issued with original issue discount ("OID") in which case, generally, each U.S. Holder would
be required to accrue interest on the Note on an accrual basis under a constant yield methodology, based
on the original yield to maturity of the Note. Because interest on the Class C Notes and Class D Notes
may be deferred without giving rise to an Event of Default, all interest (including interest on accrued but
unpaid interest) will be treated as OID unless the likelihood of deferral is remote. The Issuer has not
determined whether the likelihood of interest being deferred is remote for this purpose and, hence, will
treat the interest on the Class C Notes and Class D Notes as OID. Additionally, the Issuer will treat any

125

Class of Notes as having been issued with OID if (A) such Class is issued at a discount equal to or in
excess of the product of 0.25% of the stated redemption price at maturity of such Class and the
anticipated weighted average life of such Class or (B) the issue price of such Class exceeds the principal
amount thereof by more than the lesser of (i) 15% or (ii) 0.015 multiplied by the anticipated weighted
average life of the Class. Any accrued but unpaid OID included in income by a U.S. Holder will increase
the U.S. Holder's basis in its Note and thereby reduce the amount of gain or increase the amount of loss
recognized by the U.S. Holder on a subsequent sale or other disposition of the Note.

Any OID on the Notes will likely be accruable under the special rules set forth in Section
1272(a)(6) of the Code (which apply to debt instruments that may be accelerated by reason of the
prepayment of other debt obligations securing such debt instruments). If Section 1272(a)(6) does not
apply, the Notes might be treated as "contingent payment debt instruments" ("CPDIs") within the meaning
of Treasury Regulation Section 1.1275-4. If any such Class of Notes were considered CPDIs, among
other consequences, gain on the sale of such Notes that might otherwise be capital gain would be
ordinary income. Prospective investors should consult their own tax advisors regarding the potential
application of Section 1272(a)(6) of the Code to the Notes and the rules governing CPDIs.

In general, a U.S. Holder of a Note will have a tax basis in such Note equal to the cost of such
Note increased by any OID and any market discount that the U.S. Holder has elected to include in income
on a current basis and reduced by any amortized premium and payments of principal and OID. Upon a
sale, exchange or other disposition of such a Note, a U.S. Holder will generally recognize gain or loss
equal to the difference between the amount realized on the sale, exchange or other disposition (less any
accrued and unpaid interest, which would be taxable as such) and the U.S. Holder's tax basis in such
Note (as reduced by any accrued and unpaid interest). Such gain or loss generally will be long term
capital gain or loss (other than accrued market discount if the U.S. Holder has not elected to include such
discount in income on a current basis) assuming that the U.S. Holder has held the Note for more than one
year at the time of disposition. In certain circumstances, U.S. Holders that are individuals may be entitled
to preferential treatment for net long term capital gains; however, the ability of U.S. Holders to offset
capital losses against ordinary income is limited.

Alternative Characterization of the Notes. Notwithstanding special U.S. tax counsel’s opinion,
U.S. Holders should recognize that there is some uncertainty regarding the appropriate classification of
instruments such as the Notes. It is possible, for example, that the IRS may contend that the Class D
Notes and possibly other Classes of Notes should be treated as equity interests (or as part-debt, part-
equity) in the Issuer. Such a recharacterization might result in materially adverse tax consequences to
U.S. Holders. As a result, U.S. Holders of Notes may wish to consider the advisability of making "QEF
election" provided in Section 1295 of the Code on a "protective" basis (although this election may not be
respected since the current QEF regulations do not authorize protective QEF elections for debt that may
be recharacterized as equity). Additionally, any such characterization might necessitate those U.S.
Holders of a Class of Notes that is characterized as equity to file information returns with the IRS with
respect to their acquisition of the Notes (and be subject to significant penalties for failure to do so). For
the consequences that would apply if any Class of Notes were characterized as equity for United States
federal income tax purposes, see below under " – Tax Treatment of U.S. Holders of Income Notes."

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